Applicability of Data Protection Law in Texas to Organizations Doing Business in the Jurisdiction

The factor of "doing business in the jurisdiction" is crucial in determining the applicability of the Texas Data Privacy and Security Act (TDPSA). It ensures that entities with a commercial presence or that produce products or services consumed by Texas residents are subject to the state's data protection regulations.

Text of Relevant Provisions

TDPSA Sec. 541.002(a)(1):

"(a) This chapter applies only to a person that: (1) conducts business in this state or produces a product or service consumed by residents of this state;"

Analysis of Provisions

The Texas Data Privacy and Security Act (TDPSA) uses the "doing business in the jurisdiction" factor to define its scope of applicability. According to TDPSA Sec. 541.002(a)(1), the law applies to any person or entity that either conducts business in Texas or produces products or services consumed by Texas residents. This provision ensures that the law encompasses a broad range of entities engaged in economic activities within the state.

The criteria for applicability extend beyond merely having a physical presence in Texas. The TDPSA also covers entities that:

1. Conduct business within the state.
2. Produce products or services that are specifically consumed by Texas residents.

This dual requirement ensures comprehensive coverage of entities interacting with Texas residents, regardless of where the data processing takes place.

Further, the TDPSA specifies that the law applies to entities that:

• Process or engage in the sale of personal data.
• Are not small businesses as defined by the United States Small Business Administration (excluding certain smaller entities to avoid undue regulatory burden).

The rationale for including the "doing business in the jurisdiction" factor is to ensure that all entities with significant commercial interactions affecting Texas residents are accountable for data privacy and security. This provision protects consumers by imposing data protection obligations on businesses that derive benefits from engaging with the state's market.

Implications

For Businesses and Data Processors:

• Extended Compliance: Entities conducting business in Texas or offering products or services consumed by Texas residents must comply with the TDPSA if they meet the specified criteria.
• Regulatory Requirements: Businesses must implement measures to protect personal data, including compliance with processing and sale restrictions outlined in the TDPSA.
• Small Business Exemption: The exclusion of small businesses from certain provisions may reduce compliance costs for smaller entities while still ensuring robust data protection for larger enterprises.

Case Examples:

• A nationwide retail company with stores in Texas and an online presence targeting Texas residents must comply with the TDPSA.
• An out-of-state service provider offering digital services to Texas residents falls under the TDPSA's scope if it meets the revenue and data processing thresholds.

By defining the applicability of the TDPSA based on "conducting business" and targeting products or services to Texas residents, the law ensures comprehensive data protection coverage, thereby enhancing consumer privacy and security within the state.